Influence of sanctions on Iranian economy
Posted: Aug 13, 2018
Impact of sanctions on Iranian economy:
The main reason of choosing this topic was the importance of this subject not only on Iranian economy but also on some other countries economy. Over the research has been tried to provide information free of bias and exaggeration.
Sanctions against Iran began after the illegal entry into the Embassy of United States and hostage taking of American citizen’s in1979 simultaneously with the Islamic Revolution in Iran, and since then has continued increasingly but in recent years because of Iran's refusal to clarify its nuclear program has reached its peak. During this period, although the Iranian government has always claimed The Sanctions have been ineffective in all aspects but the truth is apart from politics and reality hidden behind politics and power. increasing rate of inflation, according to central bank of Iran, rising unemployment, Drug shortages and increased prices, Bankruptcy and closure of factories due to shortages of raw materials, Entering the inferior Chinese goods into the country, Decline in oil sales, Limitations on bank transactions, reduced export, banking problems are main results of sanction in Iran that will be reviewed. This research is not going to find ineffectively or effectively of sanctions, rather the focus will be on economic aspects.
Overview and objectives:
1-General information about Iran and some effective factors on its economy:
1-1-Geography:In the northern hemisphere between 25 and 40 degrees' latitude of the equator and between 44 and 5/63 degrees' east longitude from Greenwich it indicates that Iran position is located in the temperate zone. With an area??1648195 square kilometers. This area equivalent to one twenty-seventh of Asia and close to one ninetieth of Land–World. Iran shares borders with Iraq, Turkey, Azerbaijan, Armenia, Turkmenistan, Afghanistan, and Pakistan. Armenia and Azerbaijan are located on the north, Afghanistan and Pakistan on the east, Iraq and turkey on the west. Iran is located between Persian Gulf and Caspian Sea -the largest lake in world-In the north, being located in this geographic location has given Iran particular Importance in Asia specialty because of access to open seas.
Name: Islamic republic of Iran-Iran-IRB
Ethnic divisions: Persian 51%, Azeri 24%, Gilaki and Mazandarani 8%, Arab 3% to 7%, Lur 2%, Baloch 2%, Turkmen 2%, other 1%
language: Persian and Persian dialects 58%, Turkic and Turkic dialects 26%, Kurdish 9%, Luri 2%, Balochi 1%, Arabic 1%, other 3%
Government: Islamic republic
Currency: The official currency of Iran is rial specified by IRR. Because the rial is so small in current days' use of tooman is common, each tooman equals ten rials.
Iran's population currently about 75000000, with the continuing decline in rate of fertility. Approximately 70% live in cities; over half of Iranian population is under age 30. Men and women are split almost equally 50-50 in this category.
Fertility rate’s reduction in recent years is related to increasing educational level and concerning about future. also some economic problems can be named as main reasons.
The dominant religion in Iran is Islam by ninety nine percent of total population. From this 99%, 89% are followers of Shi’a (branch of Islam) and rest of them with the Sunni and Sufi (branches of Islam).
Non-religious is not acceptable in Iran according to Islam and country’s law.
A huge part of Iranian culture has derived from past and Iranian are always proud of their past. Religion and religious beliefs are evident in all aspects of culture. Iranian culture has always been a hero worshiper. Iranian culture values??differ between men and women. And the woman is always remembered as being weaker. Although in recent decades Traditional culture has gradually shifted from traditional to modern, some of the main reasons are; Young population, Desire to foreign cultures. Fashion, Change some social values, Change in some of religious beliefs, A large gap between the rich and the poor and the belief that the wealthy elite must have distinct social behavior. in recent years changes in cultural values was so tangible that Country’s authorities are always concerned about that and always bring it up in public meetings.
1-2-4-Public holidays in Iran:
The official weekend holyday in Iran is Friday, while in most countries Saturday and Sunday is holiday and this has always created difficulties in international trade. also there are other national holydays during year as well as official holydays such as January 3, January 11 and 12, January29, February 10, march 19 –oil national day, 20 to 24 of March-Iranian new year, April 1, April 2, April 14, may 24, June 4 and 5, June 7-21 and 24, July 30, August 9 and ten, September 2 and 22, October 16 and 24, November 13 and 14, December 21-22 and 31.over time more holidays have added to Iranian calendar According to historical and political events but most of these holidays has come from Events and religious beliefs. As mentioned, March 20 to 24 is New Year holiday but in action and reality it is fifteen days and not four days because during these fifteen days almost half of Government departments are closed.
According to young population there is a great demand for education and continuing education.Elementary education in Iran is almost free but schools charge parents for different reasons. Secondary and higher education in some governmental schools is free. Private schools work alongside other schools as well. All schools are divided by gender and there is not any coeducational school, but in higher level of education in some certain courses males and females can attend in the same time. To get admission to academic level students must to pass the national entrance examination, and it looks a firm barrier to many students, that even will force them to give up continuing their education or if they have Favorable economic conditions try to go abroad to pursue their education. The educational system has changed a lot in the last ten years. English and Arabic are two languages that students have to study during their education but more focus and emphasis is on learning Arabic because almost all students are Muslim and Muslim’s holly book is in Arabic. Altogether In the last 20 years Levels of literacy and education has increased dramatically.
1-3-1-Over view of economy B S (before sanction):
Before start of the Iran sanctions economic situation was acceptable, Revenues from oil and other exports were at a high level due to global needs to oil and high demands. Iran’s economy was in Sync with the global economy; Iran was among the rich countries of Asia. And due to good political relations with other countries, an Economic relation was in a good level. Some important improvement was achieved in the industrial and agricultural sectors, before the sanctions and Islamic revolution. The tourism sector had significant role in economy.
1-1-3-1: Exporting-B S:
In general Iran's exports are divided into two categories 1-oil-exports 2-non-oil exports but in this paper in order to have more accurate look, exports are divided in smaller and further categories. Iranian economy in the first stage has always been dependent on natural resources, over 70% of the country’s export revenues derive from oil and gas, and any increase or decrease in oil sales will have a direct impact on the economic situation. Major exports of Iran after oil and gas were: Refined Copper & Alloys, Nuts, Iron & Steel, Knotted Carpets, Polymers of Ethylene, and Polyether.
1-1-3-1-1-Oil exporting -B S:
Iran was the first country in the Persian Gulf that discovered oil in 1908.Oil has always been the Iran’s largest source of revenue. Iran has the world's fourth largest proven oil reserves after Saudi Arabia, Venezuela and Canada. And the second-largest natural gas reserves in the world. Among OPEC members, Iran's second largest oil producer after Saudi Arabia is considered. Before sanction the average amount of oil export was three million barrels a day. The lowest level of oil exporting was on 1988 the end of Iran-Iraq war, with export of two million and two hundred thousand barrels.
Table 5-Iran is the world's fourth largest proven oil reserves.
Table 6-Iranian total supply
1-1-3-1-2 –Exports of Traditional goods and handicrafts:
Handmade carpet was the most important commodity in Non-oil exports, Fresh and dried fruits, Rugs and handicrafts were another segment of this group.
1-1-3-1-3- Agricultural commodities and livestock:
In this group can name Fresh and dried fruits, caviar, cotton, shrimp, vegetables, nuts, raisins, almonds, fish, fur, leather and wool, intestine, pistachio, cumin, dates and saffron.
Pistachio is one of the most important export Products. Iran is the second-largest producer of pistachios in the world after America. The two countries have monopolized the world market of pistachio. Iran’s main export markets were Europe and North America.
1-1-3-1-4- Mineral commodities and building materials:
Iron ore, copper ore, zinc ore, chromite, molybdenum, ceramic red clay, gypsum, marble, decorative brick, salt and sand were some important exports.
1-1-3-1-5- Industrial Products:
Kinds of clothing, tights, shoes, sulfur, appliances, vehicles, washing machine powder can be named in this section.
1-3-2 Importing -B S:
Due to lack of sufficient oil refineries in Iran, country always has been forced to import refined oil products to meet the domestic needs. The other imported products, Raw materials, components and spare parts needed by industries and mines, Industrial and mining machinery and equipment, Machinery, spare parts and equipment, Chemical fertilizers, Equipment in grading and packaging of agricultural products, Telecommunication equipment, Medical equipment, hospital and laboratory, Paper and cardboard, Ironware.
1-3-3: Inflation –B S:
Inflation can be defined as rising prices and declining purchasing power over time. If the wage rate increases with the rise in prices not be synchronized, Inflation reduces the purchasing power, Savings and income. The lowest inflation rate in the past four decades was during: 1978,1985,1991,2005 the lowest rate among them was in 1985 with 6.4 percent. The highest inflation rate during past 40 years was during: 1980,1990,1995,2008.
Here we have to take a look on inflation rates before sanctions.we need this information to compare with inflation rate after sanctions.
1-3-4: Unemployment-B S:
Unemployed is defined as someone who has worked less than two hours a week. It Means worker must work at least 4 hours per month. We can find unemployment rate by dividing the number of unemployed persons looking for job on sum of employed and unemployed persons, usually it is multiplied by 100 and expressed as a percentage.
. =The number of unemployed
=Number of employed
The average unemployment rate in Iran before start of first sanction was 8% _before 1979-. It increased to 16% in 2002.
1-3-5: Central bank of Iran-:
The first Iranian bank began its activity in 1925 (Sepah bank)
Central Bank of the Islamic Republic of Iran was established in 1960, the main task of the central bank according to monetary and banking law is to protect domestic currency value and control inflation. In general, the main functions of a central bank are Note-issuing, the government Banking, managing other banks, managing foreign reserves, monetary policy.
Central bank of Iran belongs to the government. The central bank is enforcer of fiscal policy, had a lot of importance in today's Iran economy and ultimately decisive role.
Economic and political stability in country directly linked to the activities of the central Bank. Central Bank failures led to the failure of the entire system and will have a major crisis. This will be discussed in detail in the section about impact of sanctions on banking activity.1-3-6: G D P-before sanction: Gross domestic product. The total value of final goods produced by local resident economic units in the given time period (annual or seasonal) is called t he GDP (Gross domestic product). Among the macroeconomic indicators, GDP has special importance.
1-3-7- Value of currency
The value of the national currency is the purchasing power of money in any market for goods and services. Services and goods you can buy for the amount of money you pay reflect the purchasing power of money.
According to Iran’s Monetary and Banking law Iran's national currency is rial, The IRR equals one hundred dinars and riyals equal one thousand eight hundred and fifty-five ten-millionths (0.0108055) grams of pure gold. But the frequent occurrence of inflation in recent years has caused a sharp decline in the national currency of Iran, so that in Iran it’s impossible to buy something by a rial coin.
Now a day the best way to find the value of the Iranian currency is Comparing currency with American dollar.
The tourism industry is one of the world’s largest and most productive economic activities that create the highest added value and directly and indirectly influence on other economic activities. Tourism is one of the world's major sources of income and employment to be considered, so many refer to it as the world's first industry. Iran, according to UNESCO, is one of the nation's top ten tourist attractions in the world.
Before revolution, Iran had better situation in this area but in recent years everything has changed. We will review some factors that affected on Iran’s tourism industry in further.
2-Sanctions against Iran:
2-1-Definition of economical sanction:
Economical sanction can be defined as one or more state's planned actions by restricting economic relations aimed at pressuring the target country with different political purposes.
Generally, has considered two types of economic sanctions, 1-trade embargo, that Exports and imports of the target country limited or disconnected.2- Limitations, restrictions or cut financial relations. On the other hand, depending on the origin of the sanctions, are divided into three types, 1- Unilateral sanctions 2- Sanctions by several countries 3- Sanctions by the United Nations Security Council. About the effectiveness of economic sanctions, many believe that sanctions can be effective when they are applied in order to reach the targets efficiently.
In following we will see that sanctions against Iran are the sum of all kinds of sanctions.
2-1-1-Factors influencing the effectiveness of the sanctions
Effectiveness of sanctions depends on three factors: 1) Economic and financial characteristics of the country2) economic and financial relations between that country and other countries3) the global macroeconomic conditions.
The type and quality of sanctions is linked to the country's conditions. Important factors in this regard include: GDP, GDP growth rate and ratio of production of capital, the ratio of exports, Ratio of imports, the structure of exports and imports and GDP, Amount of entry and exit of capital and capital structure, Membership in regional organizations or international organizations like the World Trade Organization (WTO) and like them, Security and stability in the global economy and energy markets.
2-2-History of sanctions in Iran:
2-2-1- America's sanctions against Iran
America's first sanction against Iran was after American diplomats’ hostage event took place in 1979. In response to the embassy’s hostage taking, United States government mutually Confiscated Iran’s 12 billion $ assets. Also Americans approved a law to prevent the entry of products into the United States that come from Iran, except in cases such as small gifts, food, some carpets, etc. After release of hostages by the Iranian government, the confiscation did not end and Iran’s assets are confiscated in America until now. During the Iran-Iraq War, America has enacted sanctions against Iran arms sales. After claims of "supporting terrorism" against Iran, Ronald Reagan enacted more sanctions against Iran in 1987. In 1995, U.S. President Bill Clinton ordered the first full economic sanctions against Iran.
In 2007 Institutions such as the National Bank and the Export Development Bank of Iran, Iranian Revolutionary Guards, Iran's Ministry of Defense and Space Industry, characters related to the Iranian Revolutionary Guards and the Islamic Republic boycotted by America's Treasury Department.
In 2010 America Congress approved another unilateral sanction against Iran; the purpose of these sanctions was to pressure Iran's banking and energy sectors. In 2011 more sanctions on Iran’s oil export was approved.
2-2-2- Europe Union sanctions against Iran
On August 12, 2010 Europe Union tightened its sanctions against Iran. According to these new rules any joint venture with Iran that be related to oil and gas banned - Ban on sale or transfer of energy equipment and technology used by Iran For refining, liquefying natural gas, exploration and production -Member States shall to prohibit Provision of insurance services-Import and export of arms and equipment that could contribute to uranium enrichment or "dual use" is banned- Adding 100 new names to the list of sanctioned individuals and organizations for example The Islamic Republic of Iran Shipping Lines-
On January 23, 2012 Europe Union banned signing any new contracts to import, purchase or transport Iranian crude oil and petroleum products – Europe union approves plan to freeze the assets of the central bank and ban trade in gold and other precious metals with the bank and Iranian state institutions
2-2-3- UN sanctions against Iran
The UN Security Council has imposed four rounds of sanctions against Iran, in 2006, 2007, 2008 and 2010. First round of sanctions covered sensitive nuclear materials and froze the assets of Iranian individuals and companies linked with the nuclear program.
On March 24, 2007 the second round of sanctions, including new Constraints and financial sanctions were adopted in order to freezing the assets of more than 28 groups, companies and individuals engaged in supporting sensitive nuclear work or the development of ballistic missiles. From all countries and international financial institutions were required not to enter into new commitments donation, grants and concessional loans to the Iranian government.
On 3 March 2008 a third round of sanctions against Iran's nuclear program approved. In this resolution traveling and financial restrictions on persons and companies increased. All countries were requested to be intransigent in accepting the new commitments for grants to trade with Iran, including the provision of export credit, guarantee or insurance.
The fourth round of sanctions was approved on June 9, 2010. The UN Security Council called for actions against new Iranian banks in abroad if were suspected in connection with Iran's nuclear and missile programs, also three companies owned and controlled by Iran Shipping Lines and Iranian Revolutionary Guards were put on a blacklist. The UN Security Council asked countries to take appropriate strategies to prevent the opening of branches, subsidiaries or representative offices of Iranian banks in their territories.
3-CURRENT IRAN’S ECONOMY-AFTER SANCTION:
Iran's inflation rate equal to 40% and the real unemployment rate is about 25 to 30 percent, Reaching 40 percent among young people. 180% of the value of the Iranian rial has fallen. The sanctions led to Iran that it has been being deprived of the international financial system and it has made situation extremely difficult to trade. The country's oil exports have declined.
Another part of economic relations is exports. Iran exports to earn foreign exchange. Through these exchanges, goods and services import from the outside world.
After sanction many countries refused to import from Iran, or drastically reduced their imports. Decline in exports is equal to the revenue decline and state budget cuts. More pressure was on oil exporting.
3-1-1. Oil exporting:
With hardening of sanctions and deprivation of Iran from essential banking services and transportation Iran is facing growing difficulties to sell its crude oil. European and Middle Eastern banks are refusing from issuing letter of credit (LC), as one of the most essential tools of the trade for Iranian financial institutions. Iran’s oil production in 2008 was 3 million 892 thousand barrels a day, this figure has decreased 27% reduction, a million barrels in July 2012 to 2 million and 817 thousand barrels per day. However, Iran has increased the level of oil production gradually to offset the lack of funding. Oil and oil products are first source of income for Iran. Therefore, sanctioning countries use oil as lever of pressure. With the intensification of sanctions and the creation of barriers to the export of oil, purchasing countries preferred to cut or decrease their import from Iran. Sanctions have created a lot of difficulties in transportation from Iran and Shipping companies canceled their contracts with Iran or they asked for more payment. Insurance companies do not insure shipments of Iranian oil and this is one of the major barriers to export of oil. Buyers are always looking for easy and secure buying whether at micro level or macro. By continuing this situation good opportunity for some countries arose. When the demand is less than supply bargaining power is decreased and suppliers have to trade even with lower prices and it happened for Iranian oil exports. Several countries bought oil products from Iran with lowest price in recent years and some others refused to pay then Iran inevitably accepted goods instead of money.
3-1-1-1 -Iran oil embargo, opportunity for other countries
One of the countries that could use this opportunity and still is using is china. Iran sanctions has provided a good opportunity for China, Chinese government to pay for Iran's oil, has chosen barter trade, in this sense the money that Chinese government have to pay for the purchase of Iran’s oil, Saves in their Banks. And it buys goods and materials required for Iran to Sends to Iran. That’s why Iran market is filled with shoddy Chinese goods. Also, Saudi Arabia and Iraq have seized part of Iran's oil market in absence of Iran. In addition, Iran has some large Common oilfield with Qatar, after sanctions Qatar used situation as an opportunity and Increased rate of extraction of oil up to 10 times. The traditional customers of Iranian oil try to buy Iranian oil with easier terms with pretext of sanctions and high risk of oil trade. India is another country that buys Iran’s oil with cheaper price and doesn’t pay in dollar, but, in rupees and the most problem is here that Indian rupee over the past month has lost to 30 percent of its value against other currencies and this also leads the countries such as Iran selling oil with rupees, will suffer losses. In this situation turkey has become Iran’s new center of monetary transaction and takes huge profits.
3-1-2-Effect of sanctions on Iran's non-oil exports:
After sanctions and reduction in oil exports, Non-oil exports were considered to offset reduction in oil exports. In recent ten years' major export items in terms of dollar value were Petrochemical products (29.1 percent), Agricultural products (5.3 percent), unwrought metals (4.67%), and Textile products (3.1 percent). Development of non-oil exports was the main way to reduce dependency on crude oil sales.
Although non-oil exports have increased but Sanctions has caused a lot of difficulties and constraints. As an example Pistachio is one of the commodities that are exempt from the ban. But due to transportation problems and sanction of Iran Shipping Lines, Exporters incur additional costs and On the other hand buyers due to lack of insurance Are less willing to buy or tend to buy in lower price. What is important here is that Most of Iran's exports are intermediate goods or raw materials and not finished consumer goods.
Table 14-Iran’s largest non-oil importers, in billions dollar
After the sanctions International law limitations on imports to Iran became more difficult. Many countries refused to export some products to Iran, or asked more price. Iran was forced to provide necessary goods from other sources.
Some products have a strategic role in country Such as Food and medical drugs, Medical Devices, petrochemical raw materials, Aircraft Parts, parts for construction machinery and industrial, Etc. Iran forced to supply its necessities by purchase from brokers and dealers with several times of the actual price in the country of origin.
Five major exporters in this period were China, UAE, India, Republic of Korea and Turkey. Major imported goods including rice, semi-bleached or fully bleached rice worth 359 million dollars, Cake and other solid waste, worth 328 million dollars, Wheat grain worth 293 million dollars, Axle, wheels and spare parts worth $ 154 million and $ 130 million worth of corn for livestock. Among all countries, China has ranked first in exports to Iran.
In summary, after sanctions imports of capital goods reduced and Imports of consumer and finished goods increased.
Table 15-Iran’s exports
3-2-1- What is the reasons of the increase in imports of Finished products, after sanctions?
After sanctions many Factories and manufacturers could not provide raw material Due to high prices or Prohibition of entry, cost of production was higher than cost of finished goods. Production was not economic. In these circumstances, the country was forced to import finished goods. Many Productive factories became importer of finished products or bankrupted. for example, cost of producing a pair of shoes in Iran before was 10 dollars but after sanctions and a ban on import of Rubber Raw Materials, cost of production increased and The cost of finished goods increased to 20 dollars, at the same time Prices of imported Chinese shoes was 14 dollars, that’s why Iran's market is drowned in Chinese goods.
Iranians have been witness of the steady decline of purchasing power. Most Iranians believe that the official inflation rate is not real. Steady increase in the general price level of goods and services and the lack of a coherent plan to control inflation targeting and inflation has been higher than the level of community concern.
Iran's economy is currently experiencing rapid inflation. If increase in the general price level of goods and services increased between 4 to 8 percent, annual inflation is slight. Inflation rate has crossed 30 percent. If the rate of inflation reached 50% must accept that severe inflation has occurred. Unfortunately, there is not reliable inflation rate in Iran. According to Iran’s central bank inflation rate was 29 percent last year (2012), but it’s obvious the inflation rate is much more, political issues do not allow publishing accurate statistics. In other statistical sources inflation rate is reported 25 to 55 percent but what is clear, inflation is more than 35 percent.
3-6- Impact of sanctions on the bank's monetary and financial system:
Banking system in Iran has always been as an arm of the government in tense. All economic activities are dependent on the banking sector. First time in late 2006, the largest banks in Southeast Asia Closed down all its dealings with Iranian banks and even froze Iranian accounts in their banks.
3-6-1- The impact of foreign currency reserves account:
From first day of the first sanction of Iranian banks, all payments on account of foreign exchange reserves and the opening credits were affected by the ban. Sellers refused to send out the goods due to lack of documentation and payment transactions. As a result, opening channels of account reserves remained pending.
3-6-2- Increased risk of bank resources:
A huge amount of Iranians had financial dealings with abroad branches of Iranian banks a large part of the resources of the banks in these countries was at stake. These branches also had exchanges with foreign customers, after sanctions the process became more difficult to do business with Iranian companies and individuals and its cost increased.
3-6-3- Limitations on the operation of overseas assets or blocking deposits:
After sanctions its scope was expanded to European countries and even the United Nations. Assets of Iranian banks became blocked; banking system was faced with significant losses.
3-6-4- Increasing demands:
After sanctions companies were in trouble to supply required foreign currency through the banks. Due to the complementary nature of exchange facilities and production process, companies could not produce the anticipated production on time.
3-6-5- Impact on credit risk:
Due to increasing security concerns for export risk of trade with Iran, dealing risk with Iran increased and insurance rate of exporting goods to Iran increased, leading to increased costs and the final price of export goods to Iran.
3-6-6- Reduced international confidence in the banking system:
International sellers’ confidence fell sharply against Iranian banks, So that no interaction with these banks took place.
3-6-7- Increased time and expense of transactions and dealings:
Sanctions against Iranian banks has forced Iranian companies that are active in buying and selling goods with foreign countries, be forced to open credit Through intermediaries and brokers in absence of bank support. The most direct consequence of such work is higher transaction costs and longer time spent to achieve the goals and impact on quality and schedule. A large part of producers’ power and local companies rather than taking on development, uses on time’s and cost’s problems. This situation, in addition to inflationary time, puts pressure on producers and reduces their profit margins. Even production process may cost more than selling price. It is natural that in such circumstances, manufacturers are unable to pay expectations financial obligations to banks.
3-6-8- Investment risk for foreign investors:
By imposing sanctions, foreign investors and foreign financial institutions in terms of risk for which this country was established, practically are reluctant to invest in Iran and it has increasing effect on unemployment rate.
3-6-9-Manufacturers’ limitation in importing:
A large part of the GDP depends on imports of raw materials and spare parts, equipment and technology from other countries. The most common approach for imports from other countries in the modern world is the use of letters of credit and these are the banks that cover the letters of credit.
3-6-10-Banking sanctions impact on pharmaceutical sector
Due to banking sanctions and difficulties to pay the price of goods, some drug companies have stopped sending drugs into Iran. Because of this, important medicine for heart disease and for cancer patients and patients with respiratory problems were used, Is faced with a serious shortage. Iran's pharmaceutical sector has suffered the greatest impact of the sanctions. Over the past 10 or 15 years of advanced high-quality drugs to treat cancer, AIDS and other serious diseases were imported from abroad. Sanctions on central bank and other financial institutions these drugs do not enter in Iran. With lower oil sales and financial resources, drug purchasing power has fallen sharply.
Another visible long-term weakness of the Iranian economy is the persistence of
High unemployment rates. before talking about unemployment we must define employment. As defined by Statistical Center of Iran, Employees, who have worked at least two hours in the week before the census every year the government spends billions of dollars in job creation, but the unemployment rate has remained in Double-digits.
The government has stated that the unemployment rate in Iran is 14 percent. If we define employment as having enough income, a two-hour work week does not mean employment. Many experts estimate the average unemployment rate 25 to 30 percent. However, it’s the average unemployment rate in the entire community. Official statistics that are based on a minimum two-hour work week, declare the unemployment rate among 15 to 29-year age group, 25 to 30 percent. But if we define unemployment as the sum of all individuals who are unemployed, including those who are in pursuit of a new career, or those unable to find jobs with fair wages, we can see that the youth unemployment rate will reach 50%.
After sanctions and subsequent shortage of raw materials and non-profitability of production many manufacturing centers gradually reduced their working hours. Other centers attempted to layoff or were closed. The lack of labor market Because of the reluctance of Domestic and international investors, to invest and creating jobs are the main reasons for the rise in unemployment rate. Declared figures By the Central Bank of Iran is lower than the actual.
Iran’s Currency value has come down and tourists can make the best use of this situation but tourism industry is in serious trouble, and the number of tourists has decreased drastically. Even ordinary people have noticed a decrease in tourism. Several factors had an impact on this situation. Tourists go a place where there be peace and security, after sanctions and Escalation of disagreements with other countries, some countries tried to introduce Iran an unsafe country. Iran’s air fleet is not available and cannot give tourists service immediately, Because of the worn out aerial fleet and lack of spare parts, due to sanctions. But the main reason is propaganda against Iran.
The main purpose of sanctions was to keep Iran from enriching uranium. There isn't a lot of data and information that is being produced regularly on Iran's economy, and there's been significant gaps in information, and there's also some question over the credibility over official [Iranian] data, so that doesn't make it very easy to judge performance. But if you look at somewhat more recent reports--for instance, by the IMF on Iran's economy last August--what you see is not exactly the sort of creaking economy on its knees in the face of sanctions. Sanctions have created pressure on Iran, but Iran is also a large regional economy with a relatively diversified structure--oil is very important, but it's not entirely dependent on oil. Iran's economy is facing a lot of challenges, and these challenges have been accentuated by the sanctions. The main challenges are (and have been for a while) unemployment, especially amongst youth, and inflation, which is likely to get worse partially because of the depreciation of Iranian currency and partly because of the abolition of the subsidies scheme, which the government put in place about a year ago. These included some essential items, including energy and bread and sugar. That's now [been] in place since December 2010, and the government is already talking about a second phase where they hope to improve the targeting of the so-called "price correction." The abolition of subsidies was combined with a cash-income transfer to compensate for the rising prices. And in the first phase, the targeting was quite widespread--something like 70 percent. The government has been talking about reducing the coverage and possibly improving the terms of the cash transfer for the needier families. There's no doubt that the immediate effect of sanctions is to create hardships, and the ordinary people are not immune from that. When the Central Bank of Iran was blockaded by both the U.S. and Europe, the range and scope and severity of the sanctions became far more pervasive. Because Iran has a good relationship with its neighbors was able to partially reduce the negative effects of sanctions. But overall sanctions pressures have been on people's lives and not on government. In this situation some countries such as China, Russia and India use the opportunity very well.
Amirreza karbakhsh ravari an iranian writer.Mba